Auditing and Ethical Practices

Running head: AUDITING AND ETHICAL PRACTICES
Auditing and Ethical Practices
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AUDITING AND ETHICAL PRACTICES
Executive Summary
The main purpose of this assessment is to apply auditing procedure to the business of Insurance
Australia Group limited in order to estimate whether the financial statements of the business are
showing true and fair view. The assessment states the relevance of materiality in the course of
audit and also compute planning materiality of a business. The assessment includes analytical
procedures which significant ratios of the company are computed and analyzed to identify any
risks which the business is associated with. In section 3, cash flow statement of the company for
the year 2017 is analyzed and significant items which are discussed in the cash flow statement.
The assessment also contains analysis of audit report and significant items which are considered
by the auditor as per the audit report of the company.

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AUDITING AND ETHICAL PRACTICES
Table of Contents
Section 1..........................................................................................................................................3
Role of Planning Materiality in Audit.........................................................................................3
Disclosures and Draft notes.........................................................................................................4
Section 2..........................................................................................................................................5
Analytical Procedures in Audit....................................................................................................5
Section 3..........................................................................................................................................9
Analysis of Cash Flow Statement................................................................................................9
Going Concern Principle.............................................................................................................9
Analysis of Audit Report...........................................................................................................10
Conclusion.....................................................................................................................................10
Reference.......................................................................................................................................11

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AUDITING AND ETHICAL PRACTICES
Section 1
Role of Planning Materiality in Audit
The level of materiality which is associated with audit procedures is a key factor in
determining whether the financial statements are showing any material misstatements or not.
Materiality can be said to be a judgement which is made by the auditor of a company about a
significance of an item which is presented in the financial statements of the company (Keune &
Johnstone, 2015). The complexity or significance of items decides the materiality judgements
which is made by the auditor. It is normally seen that estimation of materiality is done in the
initial planning stage of the audit where the auditors need to make a decision as to which items
are to be considered as material by the auditor in order to effectively perform his duties. As per
ISA 320 which is related to materiality, materiality is considered to be an important factor which
influences the decisions of the auditor regarding the fairness of the financial statements of the
company. In this case, the company which is considered for analyzing the financial statements is
Insurance Australia Group Ltd (Reports | IAG Limited., 2018). The company is engaged in
insurance business and therefore, the audit process will not be conducted as in case of general
companies.
In order to estimate effectively materiality of different items which are shown in the
financial statements of the company, planning materiality is to be computed. Planning materiality
is computed at the planning stage of the audit and the estimate is used by the auditor to compute
different performance materiality estimates and also judge the materiality levels of different
items of the financial statements of the company (Emby & Pecchiari, 2013). In general
principles, planning materiality is computed considering a base which is normally the highest
value which is shown in the financial statements of the company. The base which is considered